RS nod at last? Left says no need for GST cap, Congress isolated

Political differences have held up the GST, with the Congress refusing to back it unless the government agreed to cap the tax rate at 18% and create an independent mechanism to resolve disputes on revenue sharing between states.

Finance Minister Arun Jaitley seen with WB finance minister Amit Mitra (L) addressing the media after the meeting of the state finance ministers in Kolkata on June 14, 2016. (Hindustan Times)

The country’s largest communist party said on Saturday it saw no need to cap a proposed Goods and Services Tax, isolating the opposition Congress further on a contentious clause and brightening the government’s chances of winning parliamentary approval for the measure.

Political differences have held up the GST, with the Congress refusing to back it unless the government agreed to cap the tax rate at 18% and create an independent mechanism to resolve disputes on revenue sharing between states.

But the Communist Party of India (CPI-M), which also opposes several other reforms measures, said it was not insisting on a cap on the tax rate in the 122nd Constitution (Amendment) Bill, which parliament needs to ratify for the tax to take effect.

The government says no cap should be put because exigencies might arise in future to revise the rates, which will require parliamentary approval every time.

“We are not echoing what the Congress is saying. We will be happy even if the government gives an assurance on the floor of the House to keep the tax rate low,” CPI(M)’s politburo member and Lok Sabha leader Mhd Salim told Hindustan Times.

Earlier this week, finance Minister Arun Jaitley had signalled that support had broadened among states for what is seen by investors as India’s biggest tax reform in decades. The CPI-M’s views could now force the Congress, the original author of the GST bill, to soften its stand.

The GST-linked bill has been approved by the lower house of parliament, Lok Sabha, but the numbers in the upper house, Rajya Sabha, are stacked against the government. Support from communists can help change that.

Fears of disruption in the House

If leftists support the bill, the Congress may no more be in a position to stall the constitution amendment bill that requires two-third members of the House present and voting in favour. This comes to 164 MPs in a 245-member house.

But government managers fear the Congress might disrupt the House proceedings to stall the landmark legislation. The Congress and the parties from Tamil Nadu, AIADMK and DMK, which oppose the bill, account for 74 members in the Rajya Sabha.

The CPI-M may still propose some amendments when the GST bill comes for passage. Salim said, “We were the first to support the bill even when the Congress and the BJP-ruled states were opposed to it. Our finance minister headed the first empowered committee of the finance ministers to resolve disputes on the GST.”